Fujitsu Reports Fiscal 2016 Third-Quarter Financial Results

Momentum continued in domestic Technology Solutions, and cost reductions and efficiencies improved results in Ubiquitous Solutions

Fujitsu Limited

Tokyo, January 31, 2017

Fujitsu today reported a profit for the third quarter attributable to owners of the parent of 20.3 billion yen, representing an improvement of 15.0 billion yen compared to the third quarter of fiscal 2015.

Consolidated revenue for the third quarter of fiscal 2016 was 1,115.4 billion yen, down 51.4 billion yen from the third quarter of fiscal 2015, but was essentially unchanged on a constant-currency basis. Revenue in Japan rose 3.5%. Revenue in the Services sub-segment increased, primarily from system integration business, and revenue from network products also rose. On the other hand, revenue outside of Japan decreased 15.0%. Results were significantly impacted by foreign exchange movements, and, in addition, there was a decline in revenue from infrastructure services in Europe. Compared to the same period in the prior fiscal year, the appreciation of the yen against the US dollar, the British pound, and other currencies served to reduce revenue by roughly 60.0 billion yen.

Fujitsu recorded an operating profit of 37.3 billion yen, up 23.2 billion yen from the third quarter of fiscal 2015. Operating profit improved because of cost reductions in PCs and mobile phones, and operating profit from network products in Japan benefited from higher revenue. In addition, business model transformation expenses fell by about 10.1 billion yen, from 17.6 billion yen to 7.4 billion yen.

Net financial income was 5.5 billion yen, representing an improvement of 2.9 billion yen from the same period in fiscal 2015, primarily from foreign exchange gains. Income from investments accounted for using the equity method was 0.7 billion yen loss, representing a deterioration of 4.0 billion yen from the same period in the prior fiscal year, primarily because a reserve was recorded to cover potential losses from an affiliated company in Japan.

As a result, profit for the period before income taxes was 42.1 billion yen, an increase of 22.1 billion yen from the third quarter of the previous fiscal year.

Business Segment Financial Results

Revenue in the Technology Solutions segment amounted to 764.5 billion yen, a decrease of 4.5% from the third quarter of fiscal 2015. Revenue in Japan rose 6.5%. In the Services sub-segment, revenue from system integration services and revenue from infrastructure services both rose. In the System Platforms sub-segment, revenue from network products rose on sales of mobile phone base stations to telecommunications carriers. Revenue outside Japan fell 20.3%. In addition to the impact of foreign exchange movements, revenue from infrastructure services fell on weak sales in Europe and the US. The segment posted an operating profit of 50.6 billion yen, up 15.6 billion yen compared to the same period in fiscal 2015. Despite the impact of lower revenue from the Services sub-segment outside Japan, operating profit increased, primarily due to the effects of higher revenue in the Services sub-segment in Japan and from network products. Business model transformation expenses declined by 9.5 billion yen, from 15.9 billion yen in the third quarter of fiscal 2015, related to the realignment of the hardware products business in Europe, to 6.4 billion yen in the third quarter of fiscal 2016 on a resource shift to digital services in European locations.

Revenue in the Ubiquitous Solutions segment was 259.6 billion yen, essentially unchanged from the third quarter of fiscal 2015. Revenue in Japan rose by 4.3%. For PCs, revenue rose on the back of continuing strong sales of enterprise PCs. Revenue outside Japan fell by 7.2%. Excluding foreign exchange movements, revenue was essentially unchanged from the same period the previous year. The segment posted an operating profit of 9.6 billion yen, an improvement of 10.7 billion yen over the same period in fiscal 2015. For PCs, operating profit improved because of the impact of higher revenue in Japan as well as cost efficiencies, in addition to ongoing component cost reductions at locations in Japan because of the continued strength of the yen against the US dollar.

Revenue in the Device Solutions segment amounted to 137.0 billion yen, down 9.6% from the third quarter of fiscal 2015. The segment posted an operating profit of 4.3 billion yen, down 1.4 billion yen from the third quarter of fiscal 2015. In addition to the impact of lower revenue from LSI devices, particularly for use in smartphones, operating profit declined for both LSI devices and electronic components due to the impact of lower revenue as a result of the continuing strength of the yen against the US dollar.

Fiscal 2016 Consolidated Projections

Fujitsu has revised its full-year fiscal 2016 financial forecast announced on October 27, 2016, as follows.

There has been no change to the consolidated totals in the forecast announced last time of revenue of 4,500.0 billion yen, operating profit of 120.0 billion yen, and profit for the period attributable to the owners of the parent of 85.0 billion yen. Forecasts for individual segments, however, have been revised.

The forecast for revenue for Technology Solutions has been reduced by 40.0 billion yen. At the same time, the forecast for Ubiquitous Solutions has been increased by 30.0 billion yen, while Other/Elimination and Corporate has been increased by 10.0 billion yen.

With regard to operating profit, 7.0 billion yen in business model transformation expenses (shifting resources to businesses related to digital services at locations in Europe) that, in the forecast announced last October, were included in the Other/Elimination and Corporate segment have been reallocated, with 6.0 billion to Technology Solutions and 1.0 billion to Ubiquitous Solutions. Besides this, reflecting business variability, the forecast for Technology Solutions has been reduced by 9.0 billion yen. The forecast for Ubiquitous Solutions, Device Solutions and Other/Elimination and Corporate has been increased by 1.0 billion yen, 7.0 billion yen and 1.0 billion yen respectively.

Full-year financial projections for fiscal 2016

FY2016 Projections (Full-Year)
(Billion Yen)

Change from Previous Projections (October)
(Billion Yen)

Revenue

4,500.0

-

Operating Profit
(Operating Profit Margin)

120.0
(2.7%)

-
(-)

Profit for the Period Attributable to Owners of Parent

85.0

-

About Fujitsu

Fujitsu is the leading Japanese information and communication technology (ICT) company, offering a full range of technology products, solutions, and services. Approximately 156,000 Fujitsu people support customers in more than 100 countries. We use our experience and the power of ICT to shape the future of society with our customers. Fujitsu Limited (TSE: 6702) reported consolidated revenues of 4.7 trillion yen (US$41 billion) for the fiscal year ended March 31, 2016. For more information, please see http://www.fujitsu.com.

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